Q1 2022 Latin America Banana Industry Affected by Low Banana Prices and High Production Costs

The first quarter of 2022 has not been easy for Latin American banana producers. The region has faced logistical and external conditions that have negatively affected exports. Latin America faces increased production and freight costs due to increased prices in fertilizer, packing materials, gasoline, and containers. The Russia-Ukraine war affected the global banana industry because Western sanctions prevented banana delivery to Russia, forcing producers to reallocate their supply into different European markets at lower spot prices. All Latin American banana-producing countries faced similar complications through the first quarter of 2022.

Ecuador is the largest exporter of bananas globally. Around 20% of Ecuadorian banana exports go to Russia, and 2.6% to Ukraine. Ecuador held a direct shipping route to the St. Petersburg port, which closed due to the war, leading to an oversupply of Ecuadorian bananas. According to ARCOBANANEC, the Ecuadorian Banana Marketing and Export Association, the price of Ecuadorian bananas dropped from USD 5.50 per box to between USD 1.20 and USD 0.05, which does not even cover production costs. Ecuadorian producers are requesting the government purchase the banana oversupply to distribute free locally and help the industry, but the government has not acceded yet.

So far in 2022, Costa Rica faced a drier climate that had a positive effect on reducing the Black Sigatoka pest and increasing production. Costa Rica has also faced increased production and freight costs. Producers remain affected by the Russia-Ukraine war since they cannot ship the 25,000 weekly banana boxes usually exported to Russia and 85,000 to Ukraine. Costa Rican producers have to sell their banana stocks to other European markets at a low spot price created by the global banana oversupply.

Colombian banana producers do not expect an export increase this year due to the performance of the first quarter of 2022. Producers face high production costs on fertilizers, pesticides, and freight costs. The high costs, plus the decrease in the global banana price, have producers working at a loss. In Colombia, it costs about USD 7.80 to produce a banana box, and the current prices do not allow producers to cover the production costs. In the first quarter of 2022, many producers decided to close their plantations as the business was not profitable anymore.

Despite complications in the first quarter of 2022, Guatemalan banana production and exports remained stable as “medium-tier” corporations hold most of the production share. As a result, during the first quarter of 2022, production and exports remained stable, but sales margins were small due to high production costs (fertilizer, carton box costs) and low sales prices from the Russia-Ukraine war.

All Latin American countries faced similar conditions in terms of pricing, logistics, and war complications. The US government has been pressuring Latin American countries to join the sanctions against Russia, but the countries have not acceded due to the adverse effects the war has had on the agricultural sectors. At an industry level, banana prices are low and buyers are taking advantage of the situation and negotiating at even lower prices. Members of the European Banana Producer Association and Latin American producers met in Brussels on March 28, 2022 and proposed that European markets should respect previous sales agreements and set banana box prices instead of bargaining for a lower price due to the current situation, and practice fair trade. Latin American producers cannot continue to sell at low prices with rising production and freight costs since it is unsustainable for the industry and harmful for employment. Led by the Ecuadorian Ministry of Agriculture, Latin American producers have advocated that European markets take a stance and help the industry stabilize in terms of prices and exports.